Making Tax Digital (“MTD”) has been slowly creeping up on us and many businesses are either not prepared for it or even know what it is. Read the article below for more information.
The name is reasonably self-explanatory – it is a project lead by HMRC to digitalise and automate tax returns. The idea being that your accounting software (e.g. Xero, Quickbooks) directly reports your returns into the HMRC system, creating a more real-time and automated approach.
When does this begin?
There are several phases to the roll-out, with the first being April 2019 purely for VAT. Any VAT return that meets specific criteria and where the quarter begins on or after 01 April 2019 will have to be submitted using the new MTD platform
What is the VAT specific criteria?
If your taxable turnover is equal to or in excess of £85,000 then you meet the criteria and must comply with MTD from 01 April 2019.
Although this means a sigh of relief for those of you who have turnover below this level, it is only temporary as it is likely to go live for you in 2020.
I have a paper system, what do I do?
You need to take action to ensure you are ready for the go-live data in April 2019. To do this, send us a message at ASU Accountants and we will be happy to guide you through how to best prepare for your business.
My taxable turnover is £85,000 but it will drop off in the second half of next year. Can I stop submitting via MTD?
No, once you have begun submitted via MTD then you must continue to do so until your company deregisters from VAT.
Now everything is digital, does this mean I don’t need to keep paper invoices anymore?
If the business scans the invoices received and puts the information in its ledger, providing the image is retained and contains all the detail required for VAT purposes then the business does not need to keep the original invoice unless it is required for another purpose.
Making Tax Digital is a government initiative and failure to comply could eventually lead to penalties. Every company and individual is different however so do not consider the above article as advice. All users of the above information should seek tailored advice from a professional before deciding on the treatment of their business and tax affairs.
For more information on Making Tax digital, cloud accounting, and a “no obligations” consultation, contact me via the following link.
ASU Accountants is based in Cranfield, Bedfordshire, UK. We embrace technology so don’t worry if we’re not local to you – we actively use Skype in our day to day business!